Supplier competitive advantage in inter-firm business relationships: is Keiretsu really a source of competitive advantage for Japanese automotive suppliers?

This paper explores how firms create and sustain competitive advantage in the inter-firm business relationships from a supplier’s perspective. Ultimately, this paper draws its attention to keiretsu partnerships and how it is perceived by Japanese automotive suppliers. Four main theoretical perspectives (resource based view, industrial organisation, transaction cost economics, and relational network) were considered when developing a conceptual framework based on competitive capability, market diversification, and level of engagement. The framework was examined against two best-practice automotive component suppliers. Later, primary data was also gathered through an interview with a CEO and a survey questionnaire with 11 Japanese companies. As a result, this paper classified these 11 companies into four supplier groups based on tier level (1 and 2) and affiliation condition. Findings propose that there may be little benefit in being an affiliated tier 1 supplier, and that independent tier 2 suppliers may be more competitive than affiliated ones.